Test your basic knowledge |

AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






2. Demand for a resource like labor is derived from the demand for the goods produced by the resource






3. AFC = TFC/Q






4. Two goods are consumer substitutes if they provide essentially the same utility to consumers






5. Ed > 1 - meaning consumers are price sensitive






6. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






7. The additional benefit received from the consumption of the next unit of a good or service






8. The marginal utility from consumption of more and more of that item falls over time






9. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






10. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






11. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






12. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






13. Total product divided by labor employed. APL = TPL/L






14. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






15. MUx / Px = MUy/Py or MUx/MUy = Px/Py






16. Ed = 0 - no response to price change






17. The practice of selling essentially the same good to different groups of consumers at different prices






18. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






19. A good for which higher income decreases demand






20. The difference between total revenue and total explicit and implicit costs






21. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






22. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






23. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






24. Ei > 1






25. 0 < Ei < 1






26. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






27. Ed < 1






28. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






29. Costs that change with the level of output. If output is zero - so are TVCs.






30. Es = (%dQs) / (%dPrice)






31. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






32. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






33. Ei = (%dQd good X)/(%d Income)






34. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






35. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






36. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






37. The price of a good measured in units of currency






38. The mechanism for combining production resources - with existing technology - into finished goods and services






39. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






40. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






41. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






42. The difference between total revenue and total explicit costs






43. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






44. Models where firms are competitive rivals seeking to gain at the expense of their rivals






45. Ed = 8 - infinite change in demand to price change






46. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






47. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






48. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






49. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






50. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power